Economists had expected a slowdown partly because of Winter Storm
Stella, which swept through the Northeast last month. Compared
with March 2016, building in the Northeast fell by 15%, the most
of any region.

Construction in February had been supported by warmer-than-usual
weather, and so the cooldown in March was expected to affect
homebuilding.

Single-family homebuilding, which has the largest share of the
market, dropped by 6.2% to a pace of 821,000 units.

Building permits increased by 3.6% at a rate of 1.26 million,
suggesting that construction may soon rebound. The National
Association of Homebuilders' monthly confidence index fell in
April from a 12-year high in March, but it remained relatively
strong. Builders continued to cite high regulatory costs and
ongoing increases in the prices of building materials as
challenges they face.

"The real gem of March's report was building permits, which
boomed 17% year-over-year," Ralph McLaughlin, Trulia's chief
economist, said in a note. "Permits are important because they
are the earliest signals of long-run new housing supply, so any
significant movement is something to take note of. Homebuyers
should rest assured that new home building will continue to
relieve their supply constraint in the long-run."

Economists had forecast that starts fell 3% in March at a
seasonally adjusted annual rate of 1.25 million and that permits
rose 2.8% at a rate of 1.25 million.